Service Charge Factor - The straw to break the camel's back?

With the start of the new financial year, residents of affordable and shared ownership homes have been sent their service charge bills, with many of us being dismayed at the hike in fees. Service charges are often a bone of contention; many of us dispute the value for money we receive for this charge when, more often than not, services are woefully neglected.

Year-on-year, we see more residents grapple with soaring service charges that threaten their financial stability. An Observer investigation published this weekend has shed light on the distressing reality faced by many homeowners, revealing how some of the nation's largest housing providers have implemented staggering increases in annual service charges, plunging residents into turmoil.

The impact of these drastic rises is particularly pronounced among residents who purchased shared-ownership properties, intended to offer an accessible pathway to homeownership. However, far from providing relief, these homes have become sources of financial strain for many, with service charge hikes exceeding 40% in some cases. The consequences are dire, leaving homeowners unable to sell their properties and sparking widespread discontent.

What exacerbates the situation is the lack of transparency surrounding these increases. Residents report a lack of detailed evidence to justify the sharp rises in service charges, leaving many of us bewildered and frustrated. For those in shared-ownership homes, the disparity between service charges and rents further compounds their financial burden, raising serious questions about the affordability of homeownership in such schemes.

As I’ve already stated, upset is also caused by a lack of tangible evidence of our housing providers actually providing a service that warrants the fee. Services continue to dwindle as fees continue to rise, causing further breakdowns in relationships between landlords and residents as trust and goodwill evaporates. This lack of transparency and value for money further hampers the already strained relationship between provider and end user.

This latest price hike impacting many places further pressures Housing Secretary Michael Gove to address the crisis. While government pledges to strengthen protections for leaseholders offer a glimmer of hope, residents demand concrete action to rein in unjustified increases and ensure greater accountability in the management of service charges.

Sue Phillips, Founder of Shared Ownership Resources, stated, "Households considering shared ownership must undertake initial affordability assessments to ensure that their monthly housing costs won't amount to more than 45% of their income. However, many shared owners report rapid and unexpected hikes in service charges. 100% liability for repairs and maintenance - regardless of the size of their share - is widely seen as unfair and creates an unsustainable financial burden for some shared owners.”

On top of this, we also have residents residing in homes with Grenfell-style cladding that renders their properties virtually unsellable. Insurers are further exacerbating this dilemma by demanding exorbitant premiums despite assurances of safety.

Due to these factors, we now have a growing number of residents who face the very real threat, through no fault of their own, of being unable to afford to stay in their own homes; the threat of being evicted looms over many of us.

What can us residents do?

Very little, and providers know this. However, there is a growing number of residents who have or are choosing to simply not pay their service charge. This, in theory at least, turns honest, hardworking taxpayers into criminals, if prosecuted.

One of my own neighbours canceled his service charge payment until the shared grounds of our property were, in accordance with our agreement, maintained by our landlord. Bizarrely enough, a team was dispatched this week to cut back the bushes; however, no luck on fixing the bin stores, an issue that has been beyond their ability for almost five years, despite us paying for this service.

Our provider is already on the brink of financial collapse, so it could be fair for us to assume that while the growing numbers of residents taking this form of action, our provider will quickly respond to issues in an attempt to stop the number of residents withholding pay from growing.

What happens when both provider and resident dig in and refuse to budge? For this, I have spoken with a potential criminal.

In what must be classed as a poignant display of resilience, Lindsay Bush, along with another resident, has embarked on a journey of advocacy against their landlord's troubling practices regarding service charges. Lindsay recounts, "Having fought our landlord for several years over their lack of transparency relating to service charges that don't add up, we finally decided to stop paying them." This decision, born out of frustration and a need for justice, represents a turning point in their ongoing struggle for accountability.

Identifying additional breaches of their lease by the landlord only adds fuel to their determination. Lindsay reflects, "Our landlord doesn’t understand the true meaning of social housing. They only understand 'surplus' money (profits to you and me). We feel as though we are commodities to them." This sentiment echoes the disillusionment felt by many residents who find themselves at odds with landlords prioritising profit over their well-being.

For Lindsay and her fellow resident, taking such drastic action is uncharted territory. Lindsay admits, "Having never undertaken such drastic action in our lives before by refusing to pay in this way, we feel we have no choice but to take a stand and fight for justice." It's a sentiment echoed by many who feel compelled to push back against systems that prioritise profit over people.

Supported by organisations like the Social Housing Action Campaign (SHAC) and Housing Sector, Lindsay and her fellow resident are not alone in their fight. Lindsay affirms, "We support our fellow strikers!" This solidarity among residents underscores the collective strength needed to effect change in a system that often seems stacked against them.

The fallout

Systemic failures, compounded by multiple factors, have pushed numerous providers to the brink of financial collapse. Years of subpar service provision, a lack of transparency regarding costs, have eroded tenants' trust and goodwill.

As a resident, I share in Lindsay's frustration. Without a satisfactory level of service and transparent cost breakdowns, it's becoming increasingly untenable to maintain regular payments. The bitter taste of disappointment lingers as we witness continual failure coupled with unwarranted profit-taking. While many CEOs receive yearly compensation, accountability remains elusive.

As the cost of living crisis continues, many of us may face the grim reality of having to withhold payments for services not rendered, or because we simply can no longer afford them. The looming threat of criminalisation hangs over our heads.

With payments withheld, providers face yet another shortfall. Legal recourse, while a deterrent, will be a costly endeavour for both parties, yielding little in terms of financial recovery.

Evictions loom ominously on the horizon, exacerbating the strain upon our councils and leaving vulnerable children displaced. At this juncture, we must confront the harsh truth: we have failed.

Beyond individual grievances, the issue of service charge abuse raises broader concerns about the accessibility of homeownership in England. A parliamentary inquiry warns that shared-property ownership homes are failing to fulfill their promise of affordability, prompting calls for a fundamental rethink of such schemes.

As residents mobilise in protest against unjustified increases, housing providers and policymakers are urged to heed their voices and take swift action. Transparency, accountability, and affordability must form the cornerstone of any reforms aimed at addressing the service-charge crisis and safeguarding the dream of accessible homeownership for all.

Whatever can be done, must be done together 

Establish clear and transparent guidelines regarding how service charges are calculated and what they cover, rebuilding trust between landlords and residents. Providing detailed breakdowns of costs and expenditures can help residents understand the value they are receiving for their payments.

Acknowledge that many residents will fail to comprehend the content, ignore written communications, or simply won’t have the time or capacity to engage. However, establishing regular communication channels between landlords and residents can facilitate open dialogue and address concerns in a timely manner. Regular updates on maintenance schedules, service improvements, and financial matters can help residents feel informed and involved in decision-making processes.

Empower residents to participate in decision-making processes and provide feedback to ensure that their needs and concerns are addressed. Offering educational resources and support can help residents better understand their rights and responsibilities related to service charges, empowering them to navigate complex housing issues effectively.

Utilise well-trained, compassionate housing officers with direct access to the senior leadership team, supported by local councillors and MPs, to create a community-led approach to the issue, while applying pressure upon providers to uphold their agreed level of service.

Price service charges fairly and accurately reflect the services provided. Conducting regular reviews of service contracts and obtaining competitive quotes can identify cost-saving opportunities and prevent overcharging.

Establish formal mechanisms for resolving disputes related to service charges, providing access to independent mediation or arbitration services for fair resolution. Recognise that criminal prosecution is not a tangible threat when the system collapses, emphasising the need for alternative dispute resolution.

Avoid criminalising those who cannot afford escalating service charges imposed by failing providers, placing blame on providers who fail to uphold their commitment to communities. Strengthen regulatory oversight of service charges to hold landlords accountable and prevent abuse, implementing stricter regulations and enforcement mechanisms.

Provide financial assistance or support to residents struggling to afford service charges, implementing income-based subsidies or payment plans to alleviate financial burdens and prevent arrears.

We must work together to address root causes of service charge issues and create a fair and transparent system supporting both landlords and residents.

The current pattern of providers increasing service charges, then criminalising those who can no longer afford the increased rates simply isn’t tenable. It's time to admit the cold hard truth: the sector is broken.